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Sneaking in the Back Door of the Financial Industry at the Global Alternative Funding Forum

The MC of the Global Alternative Funding Forum may have hit the nail right on the head in his opening remarks.

“Entrepreneurs have the ultimate American dream, don’t they? And the path to make those dreams come true is all about funding,” said CNN and BBC contributor Sandra Monetti as the conference opened at the Skirball Center in Los Angeles on Friday morning. “But as you’ll learn today, the path to funding doesn’t necessarily run straight through the front door. Sometimes, you have to sneak in around the back. And that’s where alternative funding comes in. You’re going to see methods today that you maybe never thought of to find that pot of gold at the end of the rainbow.”

Funding a startup is an entirely different animal today than it was five years ago, when host Dr. Victoria Silchenko, Founder of Metropole Capital Group held the first Global Alternative Funding Forum, let alone 10 or 20 years ago. The small-cap IPO has all but disappeared, while the JOBS Act has provided a range of new possibilities for entrepreneurs to tap into capital markets.

All that change is still fresh enough that it’s unclear where things are going to settle. The industry is currently roiling with change, trying to pinpoint exactly what the most effective methods for accessing capital markets will be tomorrow and in five years. All this is why an event like the Global Alternative Funding Forum is so important. Because, for all of the change and uncertainty, it’s also clear that there’s enormous opportunity for a new generation of startups to get a chance for growth that might have been impossible until only recently. The chance to tap into the crowd and forego the traditional methods of funding a company, accessing that back entrance that Moretti referenced, could mean revolutionary change that ultimately helps a lot more people access the American dream.

The Need for Supporting Crowdfunding Platforms

The first panel of the day brought some heavy hitters to the stage, with some of the most prominent voices in the small- and micro-cap securities industry taking the stage to discuss what to expect for public markets in a post-JOBS Act era. Moderated by Dara Albright, Founder of Dara Albright Media and Co-Founder of the Lendit Conference, the panel featured heavyweights David Weild, founder of the JOBS Act and Chairman and CEO of Weild & Co., and Cromwell Coulson, President, CEO, and Director of OTC Markets Group (OTCM).

While it might seem logical that people focused on the small- and micro-cap public space might see a threat from the new methods for raising capital on private markets, the panel suggested that the opposite is true. The panelists emphasized how new methods for raising capital could be an important path towards ultimately becoming a public company. The primary topic of discussion, though, was that the regulatory framework currently in place needs to be trimmed back to make going public less costly and less time consuming.

“It’s really important that we can’t have being public be painful,” said Coulson. “We need to give management back their time so they can focus on growing their businesses.”

Coulson also stressed that options like crowdfunding could actually be a powerful tool for smaller companies to connect with the investors that are most important earlier in the process.“The math is very simple,” Coulson continued. “Everybody loves to talk about how we need to bring more institutions into small companies, [but] the reality is a $100 million NASDAQ-traded company is 80% owned by individuals, and it comes through the E-trade channel. So we need to have online capital raising, crowdfunding, we need to support these platforms, we need to let this industry free, because we need companies to be able to raise capital from the same types of investors who are buying their shares on the secondary market through the E-trade channel. And we’re only going to do that … by using technology so investors can shop for good investments, using marketing so stories can come out.”

The day’s second panel, Alternative Funding Tools, Access to Liquidity and Venture Exchanges, looked closer at just how these new methods for capital raising functioned and how a company might tap into this new space.

Taking a more nuts and bolts approach, Kaselonis guided the panel through an engaging discussion of how individual companies can find new ways to approach capital raising and how investors can take part in it. With the country embarking on what panelist Mona DeFrawi, Founder at InsideVenture, Equidity, and Radivation, termed the “entrepreneurial economy,” there’s a new focus on the importance of capital-raising by startups as the manufacturing sector inevitably fades.

The final panel before the forum broke for lunch was Modern Financing Tools Under the JOBS Act: Building Brand Loyalty via Stock-Ownership. Moderator Amy Wan guided a panel made up of crowdfunding experts that took a closer look at the advantages in branding and marketing available to those companies taking the crowdfunding path. At the core of the discussion was a look at how the crowdfunding process can give startups a chance to recruit an army of motivated brand ambassadors by turning customers into investors, leveraging the marketing of a crowdfunding campaign into a much larger branding opportunity.

A.I. and Finding the Right Angel Investor

The forum picked back up after lunch with a series of TED-style talks, beginning with Wall Street legend, author, philanthropist, and Board Chairman at REX Royalties Arthur Lipper, who delved into the method of using royalties as an alternative to debt or equity for returning value to investors.

After Lipper, five speakers each took just 12 minutes to introduce some engaging topics that were especially relevant to the future of alternative funding, including speakers like Vivian Shimoyama, Regional Executive Director Southern California Region with Goldman Sachs (GS), discussed her company’s 10,000 Small Businesses Initiative that reaches out and supports entrepreneurs building new small businesses and Parker Thompson, Partner at AngelList, dug into some of the data surrounding the current startup revolution.

The rest of the afternoon kept an eye on the future, looking at the changing state of the financial and private equity industry in the future. The first panel, called Beyond the Hype: Artificial Intelligence and the Rise of Robotics in Financial Services, was a fascinating look at the future of artificial intelligence and what it might mean to the finance industry. While many of the biggest changes remained on the more distant horizon, the potential for revolutionary change was clear amongst the panelists.

The next two panels looked at the private equity markets at different stages, with The Changing Face of Angel Investors digging into some of the earliest investors in promising companies and looking at how those Angel Investors were really driving the companies that would come next. In particular, there was a focus on how the growth of involvement by women in entrepreneurship would have to grow out of increased interest in investing at the early stages.

“Finding an angel investor is one thing, finding an angel investor that’s right for you is a whole other reality,” said panelist Delilah Panio, LA Lead for Radical Generosity Fund. “So I mostly represent women entrepreneurs. The good news is that women are starting businesses at an accelerated rate, a lot more than men. The bad news is that there’s not a lot of money for women out there. So, we get about 4% of venture capital, 20-25% of angel investors. There’s lots of reasons for that, but I’d say one of the biggest realities is that investors tend to invest in who and what they know. So… if you’re a woman entrepreneur, the more likely scenario for getting funded is by another woman who is an investor. … So we need more women to be stepping up as investors.”

Following the look at angel investors was a closer look at the VC process with Venture Capitalists on the Future of Venture Capital, with four VCs looking at the process for identifying and supporting the most promising companies out there that are ready for a big influx of cash to drive expansion.

Finally, the day wrapped up with another forward-facing panel: How Blockchain is Transforming the Venture Financing Industry and Entrepreneurial Projects. Moderated by Celu Ramasamy, Managing Partner at Focus Investments, the discussion looked at just how the use of Blockchain could drive the financial industries in coming years.

Making Way for a New Generation of Entrepreneurs

With so much attention currently being paid to the economy, the Global Alternative Funding Forum provided a fascinating look into the many ways that the future of finance could be driven by methods and approaches that are only just now coming of age. The age-old traditions for securing the money necessary to grow a young business still exist, but they’re no longer the only game in town. Today’s entrepreneurs can continue to access most of those pathways, but they have a host of new options opening up before them for the first time in decades.

Precisely how this will all play out continues to be anyone’s guess. It remains entirely unclear how these changes will really affect the marketplace in the future. However, as Friday’s forum had on display, there’s a new generation of entrepreneurs, lawyers, and investors excited and ready to discover what’s next.

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